2013 was a major year for gold, following what seemed like a perpetual rally and signs that gold would keep on rising for years to come; we eventually experienced resistance and a major reversal of the yellow metal. The year ended up with a 28% drop in gold prices which might indicate that investors have realised that the metal is no longer a safe haven along with some other factors. This has led to huge question marks over the direction the metal will go in 2014.
Analysts from the major banks have some mixed views over the course of the next 12 months but the general consistent message is that gold is likely to bottom out in Q1 2014 and float around an average of $1,200 and see high volatility. Some analysts predict gold will slowly regain some strength by the end of 2014 and others see it dropping slightly from current levels but not far. One thing that all analysts agree on is that gold will remain highly volatile and its performance will stagnate for years to come as it used to be in the past.
Bullish Forecasts from Financial Institutions
- Merrill Lynch forecasts a $1,294 average with a rise to $1,350 by year end. It says gold could trade as high as $2,000 by 2016
- Commerzbank predict that gold’s current weakness is temporary and see the metal hitting $1,400 by the end of year. According to Commerzbank the pessimistic market that is further fuelled by the media indicates a rapid market reversal is likely to happen at some point.
- Barclays bank says gold will average $1,350 in the first quarter but backtrack to $1,270 per ounce by year-end.
Bearish Forecasts from Financial Institutions
- Goldman Sachs predicts “significant decline” in gold for 2013 – at least 15%
- UBS lowered its 2014 gold forecast to $1200 with a lot volatility.
- JP Morgan Chase Cazenove forecast a drop of 10% for $1,263 in 2014 and in 2015 they expect a 12% drop to $1275
- Credit Suisse says if a decline continues the way it has been going recently then we would see $900 by end of 2014
- Societe Generale predicts an average price of $1050 in Q1 2014
- Morgan Stanley say gold will extend losses into 2014 and recommends staying away from it at this point in the cycle
With the volatility levels anticipated there are clearly opportunities for traders but working with this precious metal at leverage is definitely a high risk game for the foreseeable future.